Portugal has managed to reduce its emissions and consolidate one of the cleanest electricity systems in Europe. However, energy poverty remains above the European Union average, and sectors such as transport, buildings, and industry continue to hinder the country’s climate transition.
This is revealed in the International Energy Agency’s (IEA) latest energy policy review, presented in Lisbon, where the agency acknowledges Portugal’s rapid progress in renewable generation, but warns that the second phase of the energy transition will be much more complex.
Portugal’s energy paradox
Over the past few years, Portugal has strongly promoted solar photovoltaic, wind and hydroelectric energy, which has allowed the country to reduce its greenhouse gas emissions by a 43% compared to 2005 levels. Currently, the Portuguese electricity system is among those with the lowest carbon intensity within the IEA member countries.
Furthermore, the high share of renewable energy allowed Portugal and Spain to reduce their exposure to the natural gas volatility which affected other European markets. While countries like Germany and Italy saw sharp increases in electricity prices, the Iberian market maintained considerably lower prices.
The main problem
However, the IEA warned that the 82% of energy emissions comes from buildings, industry, and transportation, with the latter being the main problem. Oil still covers 92% of the sector’s energy consumption and generates the54% of emissions related to energy in Portugal.
Although the electric vehicles reached 38% of new car sales in 2025, barely representing6% of the national fleet. The report explains that approximately 80% of vehicle purchases in Portugal correspond to used cars, and currently there are few incentives for the purchase of second-hand electric vehicles.
The IEA recommends focusing aid on low-income households and professional drivers to accelerate the electrification of the vehicle fleet.
Natural gas prices drop is putting pressure on the infrastructure
The report also warns of the accelerated collapse in natural gas demand in Portugal. According to the IEA, consumption has fallen to levels that the network operator only expected to reach in mid-2030s. The rapid expansion of solar and wind power displaced gas-fired power plants much sooner than expected.
While this decline benefits climate goals, it also creates financial risks for the gas infrastructure. Fixed maintenance costs remain high while the base of connected users decreases.
The agency warned of potential stranded assets and future tariff increases if Portugal does not develop clear plans for the phased dismantling of the gas network.
Difficulties in integrating clean energy into the electricity grid
The rapid growth of distributed generation also began to put pressure on Portugal’s electricity infrastructure. Distributed solar capacity exceeded 3.1 GW by early 2026, but the transmission and distribution networks still have restrictions on new connections.
The IEA noted that delays in planning and modernization could limit renewable deployment and slow the electrification of key sectors. The report also mentions the recent Iberian blackout which affected Spain and Portugal, used as example of the need for improvement coordination, flexibility and resilience of the regional electricity system.
Energy poverty continues to affect households
One of the most critical points of the report is the cost of electricity for consumers and businesses. The agency explains that the Portuguese electricity bill includes multiple regulatory charges and historical subsidies that make electricity more expensive compared to natural gas.
These include:
- inherited subsidies
- efficiency positions
- social tariffs
- territorial convergence costs
- audiovisual fees
As a result, many households continue to face energy poverty despite the renewable energy boom. The agency recommends shifting some of these costs into the state budget and strengthening programs for energy-efficient home renovations, home energy efficiency, and access to clean technologies.
The most difficult phase of the energy transition
Portugal maintains its goal of reducing its emissions by 55% by 2030 and achieving climate neutrality by 2045; however, the IEA argues that the country has already exhausted the simplest measures of decarbonization associated with the replacement of fossil fuels in electricity generation.
From now on, the success of the transition will depend on its ability to electrify transport, modernize buildings, transform industry and reduce energy poverty without affecting economic competitiveness.
Source: International Energy Agency